MAREVA GOLDEN ANNIVERSARY SERIES: CONFIDENTIALITY CLUBS
Authored by: Andrew Ayres KC (Barrister) - Twenty Essex & Andrew Barns-Graham (Barrister) - 3 Hare Court
This year marks the golden anniversary of Lord Denning’s seminal decision on freezing injunctions in Mareva Compania Naviera SA v International Bulkcarriers SA [1980] 1 All ER 213. (The case was reported in 1980, but the hearing took place on 23 June 1975.) To mark the occasion, Andrew Ayres KC of Twenty Essex and Andrew Barns-Graham of 3 Hare Court have published this series of articles, in which they explore the boundaries of freezing injunctions and provide their tactical and drafting recommendations. This is the third article in the series.
Introduction
Confidentiality club orders (“CCOs”) are orders or arrangements which permit only certain identified individuals to review some or all of an opposing litigant’s disclosure. They are a common feature of intellectual property and competition disputes, in which the protection of trade and technical secrets is often of paramount
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importance. However, they have also occasionally been granted in civil fraud cases, including in respect of asset disclosure given by defendants pursuant to freezing injunctions.
In this article, we first provide a brief summary of the general principles applicable to CCOs. We then provide a case study illustrating how these principles have been applied to asset disclosure, before offering our general conclusions on this issue.
However, the court’s starting-point is that each party should be allowed unrestricted access to the other party’s disclosure subject only to the rules against collateral use. It is therefore for the person seeking a CCO to justify a departure from the norm. To do so, the applicant “must establish that there is a real risk, either deliberate or inadvertent, of a party using his right of inspection for a collateral purpose”.
Clear and cogent evidence is required, and any restriction imposed should go no further than necessary for the protection of the right in question.2
General principles
The court’s jurisdiction to make CCOs is well-established and forms part of its inherent jurisdiction to regulate its own procedure in the interests of justice.
The relief is discretionary, and the court undertakes a balancing exercise which takes into account the following factors:3
(a) the degree and severity of the identified risk and the threat posed by the inclusion or exclusion of particular individuals within a confidentiality club,
(b) the inherent desirability of including at least one duly appointed representative of each party within a confidentiality club,
(c) the importance of the confidential information to the issues in the case,
(d) the nature of the confidential information and whether it needs to be considered by people with access to technical or expert knowledge, and
(e) practical considerations, such as the structure and organisation of the receiving party and their legal team and the degree of disruption that will be caused if only certain individuals are entitled to review, discuss and act upon the confidential information.
As Floyd LJ has held, “There is no universal form of order suitable for use in every case, or even at every stage of the same case”.4
The jurisdiction is therefore flexible: different types of information may require different degrees of protection, depending on their value and potential for misuse;5 and orders may be tailored to deal with matters such as the safekeeping of documents, their destruction at the end of the proceedings, and the receiving party’s obligations upon discovery of a breach.
The courts may also grant “external eyes only” orders, i.e. CCOs which appoint only members of the receiving party’s external legal team to the confidentiality club, to the exclusion of its inhouse lawyers, directors or employees. Such orders are rare, even at the interlocutory stage, and must be specifically justified.
Moreover, “external eyes only” orders become increasingly difficult to justify as a case approaches trial, as they
can impede a party from consulting its own lawyers on matters relevant to the trial. This in turn raises concerns about natural justice and the party’s Article 6 rights, while also putting the party’s lawyers in the invidious position of being unable to share relevant information with their own client.6 Once the trial begins, the further concern arises that, to make an “external eyes only” order effective, parts of the trial may have to be heard in private, which will usually infringe the principle of open justice.
For the above reasons, David Richards J (as he then was) held in 2012 that, if the jurisdiction to deny a party access to evidence at trial exists at all, it is
“so exceptional as to be of largely theoretical interest only”.7
Until recently, CCOs operating during trial were unprecedented, but the courts have recently granted them on at least two occasions.8
conspired to misappropriate around $1.9bn of P’s funds via a complex web of sham transactions.
P obtained a worldwide freezing order (“WFO”), including an asset disclosure order. In response, K contended that the proceedings formed part of a campaign against him orchestrated by the then president of Ukraine, Petro Poroshenko. K argued that, if he disclosed his Ukrainian assets to P, there was a real risk that P would breach its collateral use undertaking by sharing the information with Mr Poroshenko and the National Bank of Ukraine, who would then use it to expropriate, seize or otherwise damage his assets and business interests. K also contended that the same risk applied to his Russian assets, because he was a political enemy of Vladimir Putin.
Based on this evidence, the court initially granted (with P’s consent) an “external eyes only” order, pursuant to which information about K’s Ukrainian and Russian assets was to be provided only to identified members of P’s English solicitors. However, P’s claim was subject at the time to a jurisdiction challenge by K and the other defendants. After this challenge was dismissed by the Court of Appeal, the CCO fell for reconsideration.
Case study on CCOs in respect of asset disclosure
A claimant who obtains asset disclosure pursuant to a freezing injunction is generally required to undertake to the court not to use it for any collateral purpose.9 CCOs in respect of a defendant’s asset disclosure are therefore reserved for situations where the undertaking provides the defendant with insufficient protection.
Privatbank v Kolomoisky is a rare example of such a case. In December 2017, Privatbank (“P”), a state-owned Ukrainian bank, issued proceedings in this jurisdiction against its former majority owners – Mr Kolomoisky (“K”) and Mr Bogolyubov – and six companies, alleging that they
4 Oneplus Technology (Shenzhen) Co Ltd v Mitsubushi Electric Corp [2020] EWCA Civ 1562.
5 Eli Lilly & Co v Teva [2024] EWHC 2474 (Ch), at [18], citing OnePlus, at [39].
P sought the discharge of the CCO, arguing inter alia that (a) the confidentiality club had hampered its ability to conduct the proceedings (including the policing of the WFO), (b) the continuation of the CCO would disrupt its preparation of its case for trial, especially because K’s asset disclosure included extensive information concerning his interests in and control of various corporate entities and individuals who were alleged by P to be involved in the fraudulent scheme, and (c) K’s position that he was exposed to a real risk of persecution had weakened following Volodymyr Zelenskiy’s defeat of Mr Poroshenko in the 2019 Ukrainian presential election.
K, on the other hand, argued that the CCO should be continued until the PTR, at which point it could be reviewed. He contended that there was an ongoing risk of misuse of his asset disclosure, including because Mr Poroshenko continued to wield
6 Roussel Uclaf; Al Rawi; McKillen v Misland (Cyprus) Investments Limited [2012] EWCH 1158 (Ch); TQ Delta LLC v Zyxel Communications UK Ltd [2018] Bus LR 1544; Privatbank v Kolomoisky [2021] EWHC 1910 (Ch); Eli Lilly.
7 McKillen, at [49]-[50].
8 See Nokia Technologies v OnePlus Limited Technology (Shenzhen) Co., Ltd [2022] EWHC 2814 (Pat) and Lufthansa Technik AG v Astronics Advanced Electronic Systems (in the latter case, a Consent Order was made); see also Lilly Icos at [34].
9 Please see our separate articles in this series on the scope of the asset disclosure obligation and on the ‘collateral use undertaking’.
considerable power in Ukraine and his future re-election remained a real possibility.
Trower J found in P’s favour and discharged the CCO. He found (in summary) that the interconnectivity between the asset disclosure and the substantive issues in the case made it necessary for a fair trial of the proceedings that P was permitted to review the asset disclosure. He thus held that P’s interest in preparing for trial without the impediment of a CCO outweighed K’s interest in its continuation.
court’s analysis of future applications for CCOs in respect of a defendant’s asset disclosure.
First, Trower J emphasised that defendants applying for such orders need to adduce clear and cogent evidence both of the risk that the claimant will misuse the asset disclosure and of the harm which they stand to suffer in consequence of any such misuse. Moreover, the court’s assessment is not static. If the nature or extent of the risk or potential harm changes over time, the court will take this into account when deciding whether to continue a CCO and, if so, on what terms.
Analysis
Privatbank is clearly an extraordinary case: most defendants against whom a freezing injunction has been granted will not be able to argue that they require a CCO because they face a real risk of political persecution by a head of state.10
However, CCOs have also been granted in fraud cases where the relevant risk may arise more frequently. For example, in two cases, defendants have obtained CCOs in respect of their asset disclosure because they required enhanced safeguarding against a risk of self-incrimination due to related criminal investigations and proceedings. 11
Other examples of cases where a CCO might be justifiable in respect of a defendant’s asset disclosure include where the claimant has historically shown disregard for collateral use restrictions or has threatened to divulge disclosed information to the media or other third parties. Such fact patterns might be expected to arise more often in future fraud cases than that of the Privatbank case.
There are, however, some important general points which arise from the Privatbank decision which we anticipate will often form part of the
Second, Trower J’s judgment includes a detailed analysis of the practical difficulties which P would have suffered if the CCO in respect of K’s Ukrainian and Russian assets were continued. For example, he considered evidence from P’s solicitor that separate versions of the pleadings, evidence and submissions had needed to be prepared, to avoid the other defendants receiving information which was subject to the CCO. He also considered evidence that the past operation of the CCO had caused difficulties in policing the WFO.
The latter issue also arose in Khrapunov and Shetty,12 in which the extent to which the claimants’ lawyers had a broad mandate which enabled them to take the steps necessary to police the freezing injunction without their clients’ instructions and active participation was found to be an important factor.
Third, the decision in Privatbank does not entirely close the door on the possibility of an “external eyes only” CCO in respect of a defendant’s asset disclosure being continued into the trial preparation phase. However, it illustrates the heavy burden which a defendant will bear in seeking such an order, especially in a case where the asset disclosure is also relevant to the substantive issues for trial (as is often the case in fraud litigation).
This article does not contain legal advice. Anyone seeking advice on English freezing injunctions may contact the authors at aayres@twentyessex.com and andrewbarnsgraham@3harecourt.com.
10 Libyan Investment Authority was similarly exceptional: a CCO was made in favour of certain defendants because their physical safety (and thus their Article 2 ECHR rights) was at risk if their disclosure was misused.
11 JSC BTA Bank v Ablyazov and Khrapunov [2016] EWHC 289 (Comm) and Abu Dhabi Commercial Bank PJSC v Shetty [2020] EWHC 3692 (Comm); in Shetty, an “external eyes order” was continued due to an ongoing risk that the claimant’s inhouse lawyer whose admission to the confidentiality club was sought might be compelled to disclose the information in related criminal proceedings in the UAE.
12 Cit. sup.
ABOUT THE AUTHORS
Andrew Ayres KC Barrister
Twenty Essex
Andrew Ayres KC has been obtaining and defending freezing and search orders since 1997.
He advises on all aspects of civil fraud litigation, including early pre-emptive remedies through to enforcement, in frauds of all kinds, including trade finance, MTIC, employee, advance fee, Ponzi and crypto.
He has an established commercial disputes practice, with a core of advocacy before courts and tribunals across the globe.
He has been recommended in the legal directories in the following areas: commercial litigation, banking & finance, civil fraud, company & partnership and commercial chancery. He was also nominated for “Chancery Silk of the Year” at the 2024 Legal 500 UK Bar Awards.
Andrew has strong multi-jurisdictional connections, particularly in the Asia Pacific region, the Caribbean and within the offshore community closer to the UK. He is a leading Cayman and Eastern Caribbean advocate and adviser, focusing on all aspects of fraud, commercial, company, insolvency and trusts litigation.
Andrew has a breadth of expertise across a range of sectors and services, including aviation, banking and finance, construction and engineering, energy and natural resources, international trade, joint ventures and partnership, professional liability and risk, structured products and derivatives and TMT.
Andrew Ayres KC - Twenty Essex
Andrew Barns-Graham Barrister
3 Hare Court
Andrew Barns-Graham is a civil fraud specialist who has acted on some of the most high-profile civil fraud cases of the last decade.
The cases on his CV include National Trust Bank v Yurov, Privatbank v Kolomoisky, and Skatteforvaltningen v Sanjay Shah, all of which are have appeared in The Lawyer’s annual lists of the ‘Top 20 cases’ and have given rise to leading authorities on freezing injunctions and other civil fraud matters.
Andrew’s areas of expertise include the various causes of action associated with civil fraud, freezing injunctions (both personal and proprietary), search orders, disclosure orders (e.g. the Norwich Pharmacal and Bankers Trust jurisdictions), conflicts of laws, jurisdiction disputes, asset tracing, and enforcement remedies.
A large proportion of Andrew’s practice is international and he has worked with clients and lawyers from numerous jurisdictions around the world. He is well-versed in the challenges which arise in complex multi-jurisdictional cases involving foreign law issues or related/parallel overseas proceedings.
Andrew Barns-Graham - 3 Hare Court